Australia’s housing market has entered a severe downturn, as property values continue to shrink for the seventh consecutive month. The decline stems from worsening affordability and rising mortgage costs, which are reducing buyer demand. Recent figures from property research firm Cotality reveal that national dwelling values decreased by 1.2% in October alone, erasing $63,400 from the median home’s value since its peak in March.
The current downturn is unfolding rapidly. Capital city housing values have already fallen by 8.1% over seven months, approaching the 8.2% record decline observed during the 2017–19 downturn, but in a much shorter timeframe. Gerard Burg, Cotality’s head of research, warned that the market faces an “unusually sharp reversal,” with further declines likely if interest rates remain raised.
Brisbane and Perth lead the decline
The October figures reveal that the downturn is no longer concentrated in Sydney and Melbourne. Brisbane recorded the steepest monthly decline among the major capitals, with dwelling values falling 2%. Perth followed with a 1.7% decline, while Sydney values dropped 1.6%. Both Brisbane and Perth had experienced substantial price appreciation during the preceding housing boom, but recent declines suggest their periods of exceptional growth are ending.
The broader geographical spread of the downturn is significant. Falling values are increasingly evident across suburbs that had previously remained resilient, indicating the weakness is becoming a national phenomenon. In Sydney, values have fallen 4.7% over the past three months, while Melbourne’s values remain 7.3% below their level five years ago.
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Higher interest rates are a key driver of the downturn. Four rate increases this year have reduced borrowing capacity and increased mortgage repayments, adding pressure to households already facing cost-of-living challenges. Tim Lawless, Cotality’s research director, noted that affordability and borrowing constraints were already weighing on demand before rates began rising, with weak consumer confidence and budget changes further dampening activity.
Transaction volumes reflect the market’s struggles. Home sales over the past three months were 23% lower than a year earlier and 18% below the five-year average. Auction clearance rates across the combined capitals have consistently fallen below 50%, while properties are taking longer to sell. The median time on market has increased to 39 days, and vendor discounting has reached its highest level since May 2019. Although new listings remain 18% below average, total advertised housing stock has risen to its highest level for this time of year since 2019.
Cotality expects subdued conditions to continue through the remainder of 2026 and into 2027, with the extent of further declines depending on interest rates, employment, and buyer confidence. For prospective buyers, falling prices may create opportunities, but for recent homeowners or those with significant debt, the adjustment could be challenging.
